A $29 billion trail from the Federal Reserve's bailout of Wall Street investment bank Bear Stearns ends in a partially deserted shopping center on a bleak spot on the south side of Oklahoma City.

The Fed now owns the Crossroads Mall, a sprawling shopping complex at the junction of Interstate highways 244 and 35, complete with an oil well pumping crude in the car park -- except the Fed does not own the mineral rights.

The Fed finds itself in the unusual situation of being an Oklahoma City landlord after it lent JPMorgan Chase $29 billion to buy Bear Stearns last year.

That money was secured by a portfolio of Bear assets. Crossroads Mall is the only bricks and mortar acquired through bailout. The remaining billions are tied up in invisible securities spread across hundreds, if not thousands, of properties.

It is hard to be precise because the Fed has not published specifics on what it now owns. The only reason that Crossroads Mall has surfaced is that it went into foreclosure in April.

Part of the public concern stems from the sheer scale and complexity of the bailouts and what they will eventually cost taxpayers, with the assets shrouded in oddly named limited liability companies held by the New York Federal Reserve Bank, one of the 12 regional Fed banks in the U.S. central banking system.

On top of Bear Stearns, the Fed lent $60 billion to prop up insurance giant American International Group a few days after Lehman went under, and is also standing behind over $400 billion of assets owned by Citigroup Inc and Bank of America Corp.

"What the Fed and banks have said they are worried about is a new wave of losses on commercial real estate and here is an example of an early adopter in the Fed's portfolio," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey.

"The fact that the thing was written so that the Fed does not have the oil rights is just classic."

Crossroads Mall, half-empty after anchor stores Macy's, JC Penney, Montgomery Ward and Dillard's all pulled out, was brought out of foreclosure in April with $77 million in debt, according to Ann Marie Randolph at the Oklahoma County Sheriff's office. It is now up for sale for $24 million.

Extended Stay owes the Fed almost $900 million, consisting of $153 million in commercial mortgage-backed securities and $744 million in junior mezzanine debt, while GrandStay won Chapter 11 bankruptcy protection with a bit under $10 million in debt.

Joseph Sholder, the Santa Barbara lawyer acting for GrandStay, was startled to discover that the lender who had tried to take control of the property was the Federal Reserve.

Federal Reserve Bank of Philadelphia President Charles Plosser said the central bank should limit the securities on its balance sheet to Treasuries and create a policy for serving as lender of last resort.

The Fed’s emergency-credit programs and inconsistency in bailout decisions created confusion and showed the central bank “lacked a well-communicated, systematic approach,” Plosser said yesterday in a panel discussion at Palo Alto, California. Policy rules “would yield better economic outcomes for both monetary policy and financial stability policy,” he said.

Plosser’s comments rank him among the strong internal critics of the Fed’s efforts to stem the worst financial crisis in seven decades. The Fed “strayed into credit allocation” that should be the purview of fiscal authorities, not the central bank, he said at Stanford University.

Plosser didn’t elaborate on how the Fed would dispose of the $1.25 trillion of mortgage-backed securities it plans to purchase through March. The Fed is also buying up to $200 billion of housing-finance debt as part of efforts to lower interest rates and revive home-buying.

This month the Fed is completing $300 billion in purchases of long-term Treasuries, begun in March and aimed at lowering private borrowing costs.

Audit The Fed

The obvious question now is "What other total garbage is on the Fed's balance sheet?"

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